Markets trend 30% of the time, but these 30% moves result in the most profitable times for day and swing traders.
These are the kind of moves generated by longer time frame players and generally come out of balance zones. They also come 1 or 2 sessions after a neutral day and hence we give neutral days a lot of importance at Vtrender.
The above profile shows a 2 day balance zone between 4730 and 4848 NF.
On Thursday morning, I had tweeted out this message-
4731/42 are lower ends of 3 day balance zone. After a neutral day possibility of new trend is higher
However later that day, the market reversed above the 4731 mark and went through the entire balance area the next day covering what we popularly call the value area rule or the 80% rule.
But there was a reversal later on Friday below 4730 and the markets went into imbalance immediately.
This is the truth of Market profile- Markets always go from balance to imbalance as buyers and sellers jostle for their perception of value.
What happens now?
The gap down open confirms a market still in Imbalance mode. The evidence we want to see if is a D shaped profile showing buyers coming back into the equation.
On Friday as the market moved out of the balance zone it put in an uncorrected swing of 180 points. Such uncorrected swings are generally the start or the end of a new trend.
The biggest reaction on that one way down by the buyers was 4626 to 4660 or about 34 points.
So far this morning we have seen a reaction off the lows of 4565 to 4598 or about 33 points. Still not quite there for the buyers yet.
What I expect to see later is for buyers to step up and take the market to twice reaction target of 66 points. This will show me evidence that buyers are interested at current prices. Failure to do so will keep the swing down.
Looking ahead to the week, a retouch of the balance zone and breakdown level of 4730 if and when it materialises will be another opportunity to get short into the markets.Above that the high volume node of 4848 will be a big resistance as we have seen all through the week.
For the day time frame players, we are watching 4624- the gap fill zone and the high volumes at 4627 for reactions. Lower down our immediate targets for the day are 4536 and 4523.
The Orderflow has kept us ahead of the trends.
Here is the updated record.
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